Examining the Impact of Regulation on Equity Multi-Cap Funds in India

Economic growth is facilitated by a sound financial system. “Mutual funds are one of the main sources of capital flows to emerging economies”. “The Securities and Exchange Board of India (SEBI) is the highly powerful capital market regulator in the country and it regulates mutual funds”. The regulatory mechanism for mutual funds is quite strong in India. 11th September 2020 is a significant day for equity multi-cap funds in India. SEBI came out with a circular on that day for equity multi-cap funds. The present study endeavours to critically assess the impact of that circular on equity multi-cap funds. The study is exploratory and uses secondary data. The number of equity multi-cap funds reduced drastically after the regulatory circular. Nevertheless, one notable thing is that many fund houses launched schemes under the category of equity multi-cap funds even after this circular. The results reveal that the AUM of the two big funds (Nippon India Multi-Cap Fund and ICICI Pru Multi-cap Fund) has increased and the expense ratio has decreased in February 2022 in comparison to December 2020. The returns generated by these funds were spectacular also. As such, the impact of the circular should not be treated as a negative one for equity multi-cap funds

Performance of Mutual Funds in India: A Study with Reference to Select Equity Multi-Cap Funds

Indian Mutual Fund Industry has witnessed enormous expansion in terms of growth of Assets under Management (AUM), from a meagre Rs. 25 crores in 1964 to Rs. 36.59 lakh crores in August 2021. Equity Multi-cap mutual funds tend to invest in stocks of companies across the stock market irrespective of sector and size. As a result, these funds provide much-needed diversification. In a direct plan, the investor decides to invest directly in mutual funds without routing the investment through any distributor or agent. Due to the absence of an intermediary commission, the direct plan has a lower expense ratio than a regular plan which leads to higher returns. Since the outbreak of COVID-19, the stock markets have experienced an extensive crisis with severe dampening effects in the entire global scenario. It has affected the Indian Mutual Fund Industry as well. However, irrespective of all negative signs, the impact of COVID-19 has created a ray of hope towards rebuilding self-confidence for Indian investors during the last year in this new normal landscape. In this backdrop, the present research paper focuses on examining the performance of direct plans of four open-ended Equity Multi-cap Mutual Funds [Baroda Multi-Cap Fund (BMF), ICICI Prudential Multi-Cap Fund (IPMF), Invesco India Multi-Cap Fund (IIMF) and Nippon India Multi-Cap Fund (NIMF)] based on certain parameters. This secondary data-based study covers 8 years (2013-2021). The criterion for selecting the funds was net assets above Rs.1,000 crores as of 31.08.2021. Results reveal that the funds provided double-digit returns during the entire study period. IPMF and NIMF performed poorly and remained riskier than the benchmark during the entire study period. Further, NIMF remained the riskiest fund throughout the study period. IIMF remained the best performer in the 1-year, 5-year and 8-year periods in terms of risk-adjusted return. NIMF remained the most aggressive fund and BMF remained the most defensive fund during the entire study period. The fund managers of IIMF succeeded in quality stock-picking in 1-year, 5-year and 8-year. The fund managers of NIMF performed miserably throughout the study period and failed in quality stock picking. RSQ values portray that BMF was the most successful fund in terms of diversification during the entire study period